A number of bills have been approved by Congress, and the legalization of medical marijuana at the federal level has accelerated
On April 1, the US House of Representatives passed the federal medical marijuana legalization Act (moreact) for the second time with 220 votes to 204 votes; At the same time, the Senate federal legalization bill “marijuana management and Opportunity Act” (CAOA) is expected to be submitted in April, and the legalization of medical marijuana at the federal level is accelerated; Previously, on March 24, without debate in the Senate, all members unanimously passed the marijuana diphenol and marijuana research Expansion Act to simplify the application process for medical marijuana researchers and encourage the U.S. Food and Drug Administration (FDA) to develop medical marijuana derived drugs. By the end of 2021, 19 states in the United States (including Washington, D.C.) have legalized adult cannabis, and 39 states (including Washington, D.C.) have legalized medical cannabis.
Industry concentration continued to improve, and overseas giants accelerated the layout of medical marijuana related products
On March 23, crescolabs, a large interstate medical marijuana operator in the United States, announced that it would acquire Columbia care headquartered in New York for $2 billion. After the merger, the company may become the head medical marijuana operator in the United States, covering 55% of the population in the United States; At the beginning of this year, British American tobacco has pilot launched the electronic atomization equipment VuseCBDZone in Manchester, UK, becoming the first global atomization technology enterprise to launch CBD atomization products. Recently, British American Tobacco announced the acquisition of Organigram19., Canada’s leading cannabis licensed manufacturer. 9% of the shares, becoming its largest shareholder and making efforts to develop CBD related products; Constellation group, Heineken beer, Colgate and other consumer goods companies also continued to promote the application of medical marijuana in their products and improve the layout of relevant products.
Chinese enterprises seize the development opportunity of industrial marijuana market and actively explore the international market
Guilin Layn Natural Ingredients Corp(002166) officially laid out industrial marijuana in 2019. As of 2021q3, it has invested US $80 million to build the world’s largest industrial marijuana extraction plant in the United States, which has been listed as a demonstration project by the Indiana state government. It is expected that the project will reach formal mass production before June 30, 2022, with an annual treatment of 5000 tons of raw materials and a gross profit margin of 50%. At the same time, it has signed an agreement on entrusted processing intention with a global mainstream enterprise of industrial marijuana, More orders are expected in the future; Other companies such as Shanghai Shunho New Materials Technology Co.Ltd(002565) , Chenguang Biotech Group Co.Ltd(300138) , Meirui Health International also continue to promote their layout in fields related to industrial marijuana. We believe that with the continuous improvement of regulations and policies on industrial marijuana in the United States, the market is expected to expand rapidly, which is conducive to the layout enterprises related to the industrial chain, especially the OEM and brand enterprises with large-scale production capacity, or will usher in rapid development opportunities.
Investment suggestion: Chinese market – key recommendation: Guilin Layn Natural Ingredients Corp(002166) (global leader in CBD extraction); Suggestions for attention: Shanghai Shunho New Materials Technology Co.Ltd(002565) , Chenguang Biotech Group Co.Ltd(300138) , Meirui Health International; Overseas market – suggestions: tilraybrands; AuroraCannabis； SundialGrowers。
Risk warning: the market development is not as expected; Policy risk; Strictly distinguish between industrial marijuana and intermediate marijuana, recreational marijuana and drugs, and resolutely oppose the legalization of recreational marijuana; Business development is less than expected; Cross market valuation risk; At present, China has never approved industrial marijuana for medical use and food addition.
